• Steve H. Hanke
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    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Rosenberg On The Debt Ceiling

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Fri, 07/15/2011 - 14:27 | 1460333 Mae Kadoodie
Mae Kadoodie's picture

But...but..gold is not money.  It's only a tradition.

Fri, 07/15/2011 - 14:29 | 1460341 Xibalba
Fri, 07/15/2011 - 15:03 | 1460453 JW n FL
JW n FL's picture

Yeah.. owning the Belt Way Gang is Another Tradition! that does NOT get a lot of air time!

Fri, 07/15/2011 - 16:50 | 1460894 MachoMan
MachoMan's picture

you're gonna post the same shit I did and not give a hat tip, c'mon dude, this is the interwebs

Fri, 07/15/2011 - 15:23 | 1460518 sasebo
sasebo's picture

Who said? The same guy who said subprime was contained? He's smoking used rubbers. Don't pay any attention to him. 

Fri, 07/15/2011 - 14:28 | 1460334 inkarri9
inkarri9's picture

This is from a speech Obama made in 2006:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion.That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.

Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.

And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.

Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.

Senator Barack Obama
Senate Floor Speech on Public Debt

March 16, 2006

Fri, 07/15/2011 - 14:32 | 1460354 Tyler Durden
Fri, 07/15/2011 - 14:34 | 1460362 Piranhanoia
Piranhanoia's picture

He seriously doesn't want to be "it".

Fri, 07/15/2011 - 14:39 | 1460379 QuantTrader
QuantTrader's picture

Cite your source or it didn't happen

Fri, 07/15/2011 - 14:41 | 1460384 Sudden Debt
Sudden Debt's picture

MAD magazine june edition 2006.

or was it Hustler...

Fri, 07/15/2011 - 15:32 | 1460557 redpill
redpill's picture

The real joke of all this is that the debt ceiling is referred to in these careful and foreboding terms, as if it is some external force threatening to financially invade our land of calm and prosperity.  

The reality is, the executive branch was never supposed to be in charge of the decision to issue debt to begin with (one can certainly see how it has gotten out of control).  The Constitution specifically provides that responsibility to Congress, and when they ceded that responsibility in 1917 to the executive branch, it was a major disservice to American taxpayers.

The "debt ceiling" was the only check left on complete dictatorial control by the executive branch over bond issuance.  Fast forward to today and there doesn't seem to be much appreciation for the importance of having a cap on what the Executive branch can borrow.  But this cap is vital, because it's all we have left.  AND IT IS WORKING AS INTENDED AS LONG AS THEY DON'T RAISE IT.  

We don't have a debt ceiling just so we can keep increasing it perpetually in a sick downward spiral of future obligation.  If any of these asshole politicians were actually interested in making our national finances sustainable they would leave the cap right where it is.  ONLY then will everyone in Washington DC be forced to make the choices necessary to get us back on a fiscally sound track.  It does NOT mean we would default.  But to avoid default we would need to prioritize interest payments and we would have to pay back some DEBT before we could borrow more of it.  Sounds like a plan to me.


Fri, 07/15/2011 - 21:18 | 1461415 boooyaaaah
boooyaaaah's picture

In 1776 did we care what the world thought?

What is a rating agency?

Aren't they the ones that did not see the subprime train wreck?

And all of you Union quasi commy capitalism is bad ZH readers --- you and we know who I am talking about. Where do you think your pensions your defined benifit payoffs your free health care wher do you think the value of these will go when the Bernack prints or rather releases the flood of already printed $$$ on the American economy.

Your only hope is for a cleansing recession or even depression because a hyper inflation will wash all of your dollar denominated benifits down the drain.

So please Union Workers stop your fearless leader's spending --- he will ruin us all and you have the most to lose.




Fri, 07/15/2011 - 16:07 | 1460722 Uncle Remus
Fri, 07/15/2011 - 18:17 | 1461091 boricuadigm-shift
boricuadigm-shift's picture

Right Source!  Bingo! :-)

Fri, 07/15/2011 - 14:28 | 1460339 Clayton Bigsby
Clayton Bigsby's picture

"US bonds, which are only there because they are the "best of all evils"... which alas does not change their evilness" - awesome

Fri, 07/15/2011 - 14:49 | 1460406 brandy night rocks
brandy night rocks's picture

The ascription of a moral alignment to a financial instrument leads me to question the objectivity of the analysis.

Fri, 07/15/2011 - 14:54 | 1460422 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

How about "ethical" alignment?


Tuco Benedicto Pacifico Juan Maria Ramirez

Fri, 07/15/2011 - 15:04 | 1460457 JW n FL
JW n FL's picture

how about Aztlan?

Fri, 07/15/2011 - 18:03 | 1461068 DosZap
DosZap's picture


Ignore them, their just dumb ass Mexicans who think they own America, after getting a lot of free stuff,like welfare, and educations, and free jobs at Mickey D's.

For decades.Esp in Mexifornia.

Fri, 07/15/2011 - 22:12 | 1461484 CompassionateFascist
CompassionateFascist's picture

Hard to ignore the fact that the mayor of L.A. is "ex"-Azatlan member, and the "wise Latina" on the SC is "former" Board of Directors member of La Raza - as in: "Kill the Gringos".

Fri, 07/15/2011 - 15:17 | 1460497 TaxSlave
TaxSlave's picture

The ascription of a moral alignment to a financial instrument leads me to question the objectivity of the analysis.

Question the objectivity all you like.  How objective is the toilet slave who is held in bondage in perpetuity to these bonds?

Obviously, an inanimate object cannot be moral or immoral.  But if it is a tool designed and used explicitly and exclusively for evil, like a germ warfare munition, we can understand a little slippage in terminology -- while understanding that it exists only to serve evil.

A financial instrument that finances the enslavement of a people is a tool of evil.  And every sucker that loans money to government in the hopes that the government will extract the toil of its citizens to make them rich deserves to lose every last dime of it, and deserves punishment for funding the system that does so, for the same reason I'd happily break the knees of the guy that buys stolen tools.

It's not my debt.  And I'm not paying it.

Fri, 07/15/2011 - 14:33 | 1460344 Zedge Hero
Zedge Hero's picture

Debt ceiling, credit reviews, Bernank, they all helped the rise of Gold this week to all time highs.  This weeks newscast is all about Gold and the FED, along with the Ron Paul belittling of Bernank




Fri, 07/15/2011 - 14:31 | 1460351 Fortunes Favor
Fortunes Favor's picture

AUD/JPY Struggles Imply Risk Off / Liquidity Drain: Not Good For Equity Prices


Fri, 07/15/2011 - 15:22 | 1460515 Tinsu
Tinsu's picture

Did I read it correctly that they still are looking at 1360 yearend?

Fri, 07/15/2011 - 14:33 | 1460357 Piranhanoia
Piranhanoia's picture

DeBoer's told me diamonds are for ever?  or was that Harry Winston Smith?  They told me the gold was worth exactly this much at the time, same thing with the diamonds.  Then they told me how much to put them together and make something nice. That's when I puked. They said it happens all the time.

Fri, 07/15/2011 - 14:35 | 1460366 lieutenantjohnchard
lieutenantjohnchard's picture

if the worst happens wonder if the fed will backstop jpm? i guess they'll have to given that jpm is the treasury.

jpm: $39.51

Fri, 07/15/2011 - 14:52 | 1460411 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Yes, JPM will backstop itself!



Fri, 07/15/2011 - 14:55 | 1460427 lieutenantjohnchard
lieutenantjohnchard's picture

good point.

Fri, 07/15/2011 - 14:38 | 1460371 rubearish10
rubearish10's picture

A US default would not be Armageddon, it would just be the beginning of a new era. Think of Y2K. "We're still here you bastards"!

Fri, 07/15/2011 - 14:39 | 1460375 centerline
centerline's picture

That was one big nothing-burger.

Politics = theater = blah blah... debt ceiling will be raised.  Whatever.  Don't go to far out on that limb there Rosenberg.




Fri, 07/15/2011 - 14:39 | 1460377 Uncle Remus
Uncle Remus's picture

there are constitutional hurdles with not meeting bond repayments.


This is hilarity, ensuing.

Fri, 07/15/2011 - 14:40 | 1460382 topcallingtroll
topcallingtroll's picture

Ok everyone relax.

Obama just went back on his threat not to sign a temporary deal. He also went back on his threat not to sign a deal unless there were tax increases too.

Now that obama has backed down it is smooth sailing.

Fri, 07/15/2011 - 14:42 | 1460387 russwinter
russwinter's picture

Once again the real issue is drown out by the debt ceiling facade. S&P said it best, the key word being "foreseeable".. Moodys use the language "in the next few years". No kicking the can down the road here:

“We may lower the long-term rating on the U.S. by one or more notches into the ‘AA’ category in the next three months, if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.

Fri, 07/15/2011 - 14:56 | 1460393 Re-Discovery
Re-Discovery's picture

I heard Rosie recomend Gold Oil and Income generating Equities this morning.  Nothing about US treasuries.  I think he is a recovering deflationist now that he realizes that Fed will print forever.  I see a shift in his thinking.  We should deflate, but we wont be allowed to until no one can stop it.

Fri, 07/15/2011 - 14:44 | 1460395 global
global's picture

He's absolutely right.  The market is by its very existence net long governement bonds in size.  The only way to reduce the size of the market is for the Federal Governement to start running a surplus and retire debt, or default.  Its possible for there to be a buyers strike on new debt, but existing debt will be rolled by the current owners or they risk causing a default and detonating themselves.  Any bank not able to do this will be hastily replaced by the Fed.

Fri, 07/15/2011 - 14:55 | 1460426 Re-Discovery
Re-Discovery's picture

One thing I have always wondered in all this "who' going to buy the debt" debate is what about the thousands of funds who are essentially required to buy treasuries by organizational prospectus during their 'risk off' phase?  A loss of AAA would change this but it would take something that extreme.  Otherwise, there will always be buyers.

Fri, 07/15/2011 - 14:58 | 1460442 centerline
centerline's picture

At what price though?  That is the rub.

Fri, 07/15/2011 - 15:01 | 1460448 global
global's picture

At the price they would like to mark-to-market the rest of their book.

Fri, 07/15/2011 - 15:02 | 1460451 Re-Discovery
Re-Discovery's picture

Treasuries are traditionally anti-stocks.  It is historically the anti-correlation.  When UST yields widen and stocks are down, you will know the shitstorm has begun.  US capital flight.

Fri, 07/15/2011 - 14:48 | 1460399 Temporalist
Temporalist's picture

"I also believe there are constitutional hurdles with not meeting bond repayments."

What that ancient piece of paper?  Since when has the Constitution mattered in the last 50 years?

Fri, 07/15/2011 - 14:51 | 1460409 Buckaroo Banzai
Buckaroo Banzai's picture

The endgame of total monetization has begun.

Fri, 07/15/2011 - 14:57 | 1460436 centerline
centerline's picture

Seems that way.  Events are beginning to accelerate, stakes are being raised, and the blame game is warming up as expected.

Fri, 07/15/2011 - 14:52 | 1460414 ABG LINE
ABG LINE's picture

Rosenberg: "Blah, Blah and Blah"

You're boring, man.

Fri, 07/15/2011 - 15:10 | 1460439 Youri Carma
Youri Carma's picture

Don't agree with Rosenberg cause in fact the US allready defaulted with the beginning of QE. Or the US is gonna default soon with the debt ceiling shenanigans which is highly unlikely or Beranakesan will start QE3 which will have the same result only in a much slower process later.

Either way the US defaulted.

Fri, 07/15/2011 - 14:58 | 1460440 throughthewire
throughthewire's picture

Don't be the last to get aboard the treasury bubble. The countdown is on and engines are beginning to fire.

Fri, 07/15/2011 - 15:09 | 1460466 gwar5
gwar5's picture

Somebody needs to silence Obama on debt ceiling talks. The house makes all the spending bills. Give Obama a bill at the last minute to either sign or veto. We don't need his approval beforehand.

Obama's Johnny-come-lately rhetoric and lack of budgets for the last 3 years is stupefying. His 1.5 yearly deficits and the fact that it's Obama's experts that have all left in dismal and complete failure are more proof he has any fiscal credibility.

Obama needs to take his own 2009 advice and 'sit down shut up and get out of the way'. The current congress was elected to clean up the mess he made his first two years.

Fri, 07/15/2011 - 15:15 | 1460483 CrashisOptimistic
CrashisOptimistic's picture

The Senate won't pass it.

The only question about the whol thing not yet answered is will the House GOP cave and sign onto the McConnell plan.

But more deeply, the real issue is who came to the negotiations for what purpose.  Obama arrived to get re-elected.  McConnell arrived to try to become Majority Leader.

The House GOP arrived to address the problem.  They are bomb throwers.  They were elected to throw bombs and about, oh, a good 40% of them don't care if they are not re-elcted.  The rest do care, and they were sent there to throw bombs.  They will throw them or be removed in a primary.

That's the key to the whole matter.  2/3 of the people in the room are oblivious to the world having changed.  They are still playing old school politics.  Only the House GOP knows the world has ended.

Now that's not to say their proposed solution is correct.  That's just asserting that only they showed up to do something more than keep the train wheels turning .

Fri, 07/15/2011 - 15:15 | 1460491 gwar5
gwar5's picture

Somebody needs to silence Obama on debt ceiling talks, not Cantor.

Congress makes the spending bills. Hand Obama a bill at the last minute for him to sign or veto. If he vetos it, the consequences are his. Don't need Obama's approval.

Obama's Johnny-come-lately rhetoric and lack of budgets for the last 3 years is stupefying. His 1.5 yearly deficits and the fact that it's Obama's experts that have all left in dismal and complete failure are more proof he has any fiscal credibility.

Obama needs to take his own 2009 advice and 'sit down shut up and get out of the way'. The current congress was elected to clean up the mess he made his first two years.

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